With a newly revised 143 billion barrels of crude in reserve, Iraq will is pressing ahead to convert its black gold into cold hard cash.
Iraq was the world’s 12th largest oil producer in 2009, and has the world’s fourth largest proven petroleum reserves after Saudi Arabia, Canada, and Iran.
Just a fraction of Iraq’s known fields are in development, and Iraq may be one of the few places left where vast reserves, proven and unknown, have barely been exploited.
Iraq’s energy sector is heavily based upon oil, with approximately 94 percent of its energy needs met with petroleum. In addition, crude oil export revenues accounted for over two-thirds of GDP in 2009.
Iraq’s oil sector has suffered over the past several decades from sanctions and wars, and its oil infrastructure is in need of modernization and investment.
As of June 30, 2010, the United States had allocated$2.05 billion to the Iraqi oil and gas sector to begin this modernization, but ended its direct involvement as of the first quarter of 2008.
According to reports by various U.S. government agencies, multilateral institutions and other international organizations, long-term Iraq reconstruction costs could reach $100 billion or higher.
The proposed Hydrocarbons Law, which governs oil contracting and regulation, has been under review in the Council of Ministers since October 26, 2008, but has not received final passage.
Reserves
Iraq raised its proven oil reserves figure by 25% Monday in a bid to match the clout of leading producer Saudi Arabia and strengthen its case for OPEC to grant it a higher output quota.
Deputy Prmime Minister for Energy (then Oil Minister) Hussain al-Shahristani said in October new estimates of reserves at the West Qurna and Zubair fields helped push the total figure to 143 billion barrels. West Qurna was now the second largest field in the world, he said, and more fields were likely to be discovered.
Until the revised estimate, Iraq’s proven reserves had been put at 115 billion barrels, already the world’s third largest, however it was based on outdated data.
The return of international oil companies to Iraq had boosted oil reserves, Shahristani told a news conference.
“The oil reserve is for 66 discovered oilfields in Iraq and there are many others that have not been discovered yet.
“It is expected this figure will be increased when these oilfields are discovered,” he said.
The majority of the known oil and gas reserves in Iraq form a belt that runs along the eastern edge of the country. Iraq has 9 fields that are considered “super giants” (over 5 billion bbls) as well as 22 known “giant” fields (over 1 billion bbls).
In 2009, Iraq’s crude oil production averaged 2.4 million barrels per day (bbl/d), about the same as 2008 levels, and below its pre-war production capacity level of 2.8 million bbl/d in 2003.
About two-thirds of production comes from the southern fields, with the remainder from the north-central fields near Kirkuk. At present, the majority of Iraqi oil production comes from just three giant fields: North and South Rumaila in southern Iraq, and Kirkuk.
Currently, the Ministry of Oil has central control over oil and gas production and development in all but the Kurdish territory through its three operating entities, the North Oil Company (NOC), the South Oil Company (SOC), and the Missan Oil Company (MOC), which was split off from the South Oil Company in 2008.
Kurdistan Issues
The Kurdistan Regional Government (KRG), the official ruling body of a federated region in northern Iraq that is predominantly Kurdish, passed its own hydrocarbons law in 2007.
Despite the lack of a national Iraqi law governing investment in hydrocarbons, KRG has signed oil production sharing, development and exploration contracts with several foreign firms, and began exporting its own oil briefly.
Development Plans
Iraq has begun an ambitious development program to develop its oil fields and to increase its oil production. Passage of the proposed Hydrocarbons Law, which would provide a legal framework for investment in the hydrocarbon sector, remains a main policy objective.
Despite the absence of the Hydrocarbons Law, the Iraqi Ministry of Oil signed 12 long-term contracts between November 2008 and May 2010 with international oil companies to develop 14 oil fields.
Under the first phase, companies bid to further develop 6 giant oil fields that were already producing with proven oil reserves of over 43 billion barrels. Phase two contracts were signed to develop oil fields that were already explored but not fully developed or producing commercially.
Together, these contracts cover oil fields with proven reserves of over 60 billion barrels, or more than half of Iraq’s current proven oil reserves.
As a result of these contract awards, Iraq expects to boost production by 200,000 bbl/d by the end of 2010, and to increase production capacity by an additional 400,000 bbl/d by the end of 2011.
When these fields are fully developed, they will increase total Iraqi production capacity to almost 12 million bbl/d, or 9.6 million bbl/d above current production levels. The contracts call for Iraq to reach this production target by 2017.
Infrastructure Constraints
Iraq faces many challenges in meeting this timetable. One of the most significant is the lack of an outlet for significant increases in crude oil production. Production increases of the scale planned will also require substantial increases in natural gas and/or water injection to maintain oil reservoir pressure and boost oil production.
Iraq has associated gas that could be used, but it is currently being flared. Another option is to use water for re-injection, and locally available water is currently being used in the south of Iraq.
However, fresh water is an important commodity in the Middle East, and large amounts of seawater will likely have to be pumped in via pipelines that have yet to be built.
ExxonMobil has coordinated initial studies at water injection plans for many of the fields under development. According to their estimate, 10 -15 million bbl/d of seawater could be necessary for Iraq’s expansion plans, at a cost of over $10 billion.
Gas Field Auction
Iraq plans to hold a licensing auction later this year to award the giant Nassiriya oil field to international oil companies, the country’s Deputy Prime Minister for Energy Hussein al-Shahristani told a visiting Japanese minister of trade and industry.
“Prequalified Japanese companies will be invited to develop the field, along with other interested firms,” Shahristani said during a joint news conference with Japan’s trade minister Akihiro Ohata broadcast on state-run al-Iraqia television in January.
The Japanese minister called on the Iraqi government to resume negotiations with a group of Japanese firms to develop the Nassiriya oil field, Kyodo news agency said, quoting Japanese officials.
Back in August 2009, a Japanese consortium led by Nippon Oil Corp rerached an agreement in principal with the Iraqi government for rights to develop the Nassiriya oil field.
But negotiations have effectively been suspended, partly because of the national parliamentary election Iraq held in March 2010. Baghdad then said the talks reached a dead end and the ministry of oil would develop the field relying on its own resources.
Nassiriya currently produces around 10,000 barrels a day from a field size estimated to be in the region of 4.4 billion barrels.
Iraq is lapping up Specialist Services
Expro’s Ultimate Well Testing Package is a self-sufficient solution, that can be rigged up and operational within one hour of arriving on location, according to Specialist Services.
The equipment can operate continuously for 48 hours under flaring operations and seven days under non-flaring operations without any external supply.
“Although standard Well Testing equipment includes Separators, Surge Tanks, Heat Exchangers, Water Bath Heaters, Flares, Burner Booms , Choke Manifolds, Crossovers, Filters and other accessories these are rarely combined together into such a comprehensive package”, explained David Smith, Specialist Services’ global business development manager.
“Specialist Services’ strength is that we listen to our client carefully, with a thorough understanding of their project challenges, we then customise the design so it fits perfectly with the client’s specific requirements. Together with Expro, we have developed their ‘Ultimate Well Testing Package’.”
“The difference between most mobile well testing packages and this one is the ultimate flexibility it provides,” explained Mark McGouldrick, Expro’s technical manager for MENA Region.
“Most of the information provided by our Iraqi customers is based on data that is 20-30 years old, it is very difficult to validate the information. That’s why we want to offer our clients as many options as we can to operate whatever the location and well characteristics”.
Split between four giant trailers, these packages are designed and pre-engineered to offer a “plug–and-play” solution.
It also incorporates advanced pressure, temperature and flow measurement that allows data to be acquired under both high and low pressures and flow rates.
CCTV and tannoy systems are installed in various locations on the trailer to ensure operating integrity and improve communications between the Data Acquisition Laboratory and the personnel operating the equipment.
“We want our field personnel to enjoy operating these Well Test Packages. If our field personnel in Iraq enjoy working with this equipment, then our clients will see benefits through improved data collection, improved operating efficiency, etc, then the goal of Expro and the Specialist Services team has been achieved,” said McGouldrick.
“Driven by the ambitious oil production enhancement plan, these equipments are often required on tight schedules. Especially when products are built to customised design, there are lots of details that need to be addressed. Specialist Services’ operations team have done a great job keeping the project on schedule without compromising on quality and safety,” McGouldrick added.
Iraq’s new oil minister, Abdul Kareem Luaibi last month said that the country should increase its output from the existing 2.6 million bpd to 12 million bpd over the next six or seven years.
Over the past 18 months many oil field drilling and development contracts have been awarded by Iraq’s national oil companies in order to achieve the ambitious target.
